Conversion of Private limited Co. into LLP

Key Benefits:

A) Tax Benefits

The most important reason for conversion of a company into an LLP is on the tax front. Currently, the Income-tax Act, 1961, provides for payment of minimum alternate tax (MAT) as also for payment of dividend distribution tax (DDT) by companies. An LLP, which is not a company, should not be liable to pay MAT or DDT.

B) No Limit on number of shareholders/partners

Unlike private limited companies (shareholders limited to 50), an LLP can have unlimited number of partners.

C) Minimal Compliance Level & Cost effective model

There is no need of compliances related to meetings and maintenance of huge statutory records.

D) Automatic transfer

All the assets and liabilities of the Company immediately before the conversion become the assets and liabilities of the LLP.

E) No Stamp Duty

All movable and immovable properties of the company automatically vest in the LLP. No instrument of transfer is required to be executed and hence no stamp duty is required to be paid.

F) No Capital Gain Tax

No Capital Gains tax shall be charged on transfer of property from Company to LLP.

G) Continuation of Brand Value

The goodwill of the Company and its brand value is kept intact and continues to enjoy the previous success story with legal recognition.

H) Carry Forward and Set off Losses and Unabsorbed Depreciation

The accumulated loss and unabsorbed depreciation of Company is deemed to be loss/ depreciation of the successor LLP for the previous year in which conversion was effected. Thus such loss can be carried for further eight years in the hands of the successor LLP.

Key requirements:

•  On Conversion, all the members/shareholders of the company shall become partners of the LLP in  the same proportion in which their capital accounts stood in the books of the company on the date  of the conversion.

•  Upto date filing of Income tax returns & Annual returns with RoC

•  consent of all the unsecured creditors for the proposed conversion

•  The partners receive consideration only by way of allotment of shares in LLP

•  Minimum 2 Designated Partners

•  Atleast 1 of the designated partners shall be an Indian Resident

•  If a body corporate is a partner, it has to nominate a natural person as its nominee

•  The Partners and Designated Partners can be same person

•  There is no concept of share capital, but there has to be some sort of contribution from each             partner

•  DPIN (Designated Partner Identification Number) for all the Partners

•  DSC (Digital Signature Certificate) for all of the Designated Partners

Steps in Conversion of Private Limited Company into an LLP:

Step No.

Steps

Timeframe (Working days)

Processing

DPIN (Designated Partner Identification Number)

• Approved DPIN is a pre-requisite for incorporation process

 

 

  5  
• Apply for DPIN and get a provisional DPIN

• Certification/Attestation of director's personal details

• Sending the same to the MCA Cell and getting it approved

2
Application for Name Availability

• Filing of Form 1

3
On conversion of Firm only addition of the  word “ LLP in existing name of the Firm  as last word is allowed
Documents required for incorporation of an LLP

• LLP Agreement

• Form 2

(Statement by Promoter)

• Form 3

(Information regarding the LLP Agreement)

• Form 4 & Form 9

(Notice of Consent & Appointment of Designated Partners with their personal details)

• Subscription sheet signed by the promoters

• Duly stamped LLP Agreement

• Proof of Address of Registered Office

2

 

 

 

 

 

 

 

 

Drafting the LLP Agreement and after getting it vetted by Promoters, sending it for printing

Important attachments for Form 17

• Statement of partners

• Statement of Assets and Liabilities of the  company duly certified as true and correct  by the C.A.

• List of all the unsecured creditors along  with their consent to conversion

• Approval from any other body/authority,  if required

• Processing of eForms

Final Process:

• Filing all the above documents with the ROC.
• Follow up with the ROC Making changes in LLP Agreement.
• Other Incorporation documents as suggested by the ROC

5

 

 

 

• Online uploading of e-Forms  

• Payment of Registration fees

• Issue of Certificate of Incorporation